It's the system that needs fixing

A case in point: retroactive tariffs on Chinese solar panels

By Tony Paradiso

Published: September 7, 2012

The economy is at center stage in the presidential race, and both candidates claim to have the formula for economic growth. Sure they do.

On one hand, the president -- like most politicians -- is a lawyer with zero organizational experience. A law degree may qualify you to practice law, but not necessarily make them. That is, unless you believe that creating convoluted 2,000-page documents seems a good way to go.

Mitt Romney theoretically possesses the requisite business and organizational savvy. Then again, “W” was touted as the CEO president. How’d that work out for us? What makes anyone think Mr. Romney can run the country when he can’t even run a campaign, after seven years of practice?

Until we realize that it is the system that’s broken and in dire need of an overhaul, the best likely outcome is for government to inflict minimal harm. For example, hopefully the bureaucrats will reconsider the virtue of imposing retroactive tariffs on Chinese-made solar panels.

Imagine running a small solar company and receiving a tax bill to the tune of $138,000. That’s what happened to one business. Note that the tax bill was two-and-a-half times greater than the original cost of the solar panels.

I’m not defending China’s actions. And notwithstanding the benefit that dumping may yield in proliferating solar energy, it’s an unfair practice, and imposing a tariff is an appropriate response. But making it retroactive?

A clueless Commerce Department spokesman said media coverage of its dumping investigation should have served as a warning to buyers. So I suppose the “warnings” were also made retroactive 90 days. Heck, why not make the tariffs retroactive a year, or better yet, in perpetuity? Think of the tax windfall.

The International Trade Commission is also investigating the matter, and fortunately it can overrule the Commerce Department. Let’s hope someone at the ITC adheres to the minimal harm mantra.

Health care threshold

When small businesses aren’t busy looking over their shoulder, they’re trying to understand the implications of the oncoming train known as Obamacare. The Affordable Care Act creates the most angst for companies with about 50 employees because that is the threshold that requires a company to provide health care.

Hard thresholds always pose a dilemma for anyone hovering around the threshold. In this case, companies face the unenviable decision of whether to stop growing, or attempt to grow large enough to compensate for the higher costs.

By the way, the same problem would exist if miraculously Washington managed to simplify the tax code by reducing the number of brackets.

So the question is not if there will be an impact from Obamacare, but how large the impact will be. Retail, and in particular restaurants, will be hit the hardest. McDonald’s CFO estimates that the law will add between $10,000 and $30,000 in costs to each of the 14,000 McDonald’s restaurants.

On a macro level, there are approximately 500,000 businesses with between 20 and 99 employees. The Census Bureau doesn’t publish how many businesses employ between 40 and 60 people, but assuming an equal distribution within the range there would be about 150,000. Even if a quarter of these companies decide not to grow, or worse, cut back to below the threshold, the impact would not be inconsequential.

And finally, a quick comment on next week’s Federal Reserve meeting. The financial markets are waiting with bated breath for additional stimulus. I hope they can hold their breath for a long time, because I continue to believe that the Fed will not act prior to election. If the Fed doesn’t act, expect a market selloff.

Tony Paradiso of Wilton is an author, professor, entrepreneur, radio and TV commentator. His website is tonyparadiso.com.

This article appears in the September 7 2012 issue of New Hampshire Business Review